July 12, 1999    
This Date's Issues: 3390 • 3391  •

Johnson's Russia List
#3390
12 July 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Moscow mayor ponders alliance with ex-Russian PM.
2. Reuters: Russian nationalist says to run for presidency. (Baburin).
3. AP: Kissinger Looks at Events He Shaped.
4. Reuters: Y2K bug could produce a Russian Bill Gates, or...
5. The Electronic Telegraph (UK): Marcus Warren, MiG pilot flies in face of 
Russian male prejudice.
6. Reuters: Russian gov't broke, but economy mending.
7. Ray Thomas: WHO HAS THE VIRTUAL ECONOMY/re Moody/3388.
8. Ira Straus: re Goodman #3381. Who lost Russia? Bush did.
9. Val Samonis: on "Kolodko/Russian Malaise and Polish Success"/3384.
10. Boston Globe: David Filipov, Yeltsin power grab seen in Belarus.] 

*******

#1
Moscow mayor ponders alliance with ex-Russian PM

MOSCOW, July 11 (Reuters) - A political party led by Moscow mayor Yuri
Luzhkov is planning to ask former Prime Minister Yevgeny Primakov to be its
lead candidate in parliamentary elections due in December, Interfax news
agency said on Sunday. 

Primakov has not said how he would respond to such an offer but an alliance
with Luzhkov would unite two of Russia's leading politicians, both of whom
are potential candidates for a presidential election due in mid-2000. 

Interfax quoted a source in Luzhkov's centrist Fatherland Party as saying
its leaders had agreed on Saturday to invite Primakov to head its list of
candidates in December's election to the State Duma, the lower house of
Parliament. 

A senior member of Fatherland later confirmed to Ekho Moskvy radio station
that party leaders had discussed the idea of cooperation with Primakov, but
he did not say whether it had taken a final decision on making him a formal
proposal. 

He also said Primakov had not yet decided how to respond to Fatherland's
growing interest. 

``Yevgeny Maximovich (Primakov) has constant working contact with Yuri
Mikhailovich (Luzhkov),'' Andrei Isayev told Ekho Moskvy. ``And he knows
Fatherland regards him as a political partner and ally.'' 

Primakov, 69, was dismissed by President Boris Yeltsin in May. Yeltsin
accused him of failing to do enough to lift Russia's economy, but many
politicians say the president had become jealous of Primakov's growing
influence and authority. 

Primakov, an ex-spymaster and foreign minister, has said he has no
presidential ambitions, but many political analysts say he could launch a
presidential bid or seek a place in the Duma. 

Opinion polls show he is widely respected, suggesting he would be a prize
catch for any party seeking extra votes in December. Even so, Luzhkov would
be unlikely to drop his own presidential ambitions in favour of Primakov. 

Other possible presidential candidates include Communist Party chief
Gennady Zyuganov, liberal Grigory Yavlinsky and regional governor Alexander
Lebed. Nationalist parliamentarian Sergei Baburin said on Sunday he would
also stand. 

Yeltsin is barred by the constitution from seeking another term as president. 

*******

#2
Russian nationalist says to run for presidency

MOSCOW, July 11 (Reuters) - Russian nationalist leader Sergei Baburin said
on Sunday he planned to be a candidate in next year's presidential
election, RIA news agency reported. 

Baburin, 40, announced his intentions after a meeting of his Russia's
Peoples Union party in Moscow. 

``The matter has been decided and supported by my colleagues in the
Russia's Peoples Union -- for me to enter the battle for the post of
president,'' Baburin told RIA. 

Baburin is a deputy speaker in the State Duma, the lower house of
parliament, but his party is small and he would be an outsider in the
presidential race due midway through next year. 

Possible presidential candidates include Moscow mayor Yuri Luzhkov, former
Prime Minister Yevgeny Primakov, Communist Party chief Gennady Zyuganov,
liberal Grigory Yavlinsky, regional governor Alexander Lebed and
nationalist Vladimir Zhirinovsky. 

President Boris Yeltsin is barred by the constitution from seeking another
term as president. 

******

#3
Excerpt
Kissinger Looks at Events He Shaped
July 11, 1999
By CHRIS TOMLINSON

NEW YORK (AP) - Sitting in his 26th-floor Park Avenue office, against a 
backdrop of photos of himself with many of the 20th century's most 
influential people, Henry Kissinger looks out at a world drastically 
different from the one he shaped as America's top diplomat.

``There is no recollection of what the Cold War was like,'' Kissinger said.

``I keep hearing about how tough foreign policy is now, but (in 1969) we had 
a thermonuclear adversary with 15,000 nuclear weapons. When we came into 
office - the administration under which I served - there were 400 dead a 
week'' in Vietnam.

``Now when we have one dead, or there is one prisoner taken, we have a 
national emotional breakdown,'' he added in an interview with The Associated 
Press.

Whether it is U.S. relations with China and Russia, the peace process in the 
Middle East, ethnic conflict in Africa and southeastern Europe, or human 
rights abuses in Chile, Kissinger had a hand in all of it a quarter century 
ago.

In his third and final volume of memoirs, ``Years of Renewal,'' Kissinger 
aims to remind the world of the role he played in 1973-76 as secretary of 
state for Presidents Nixon and Ford and of the context in which he made 
decisions that still reverberate today.

Where U.S. policy was successful, Kissinger gives credit to Ford and himself. 
Where the administration failed, he blames the Democrat-controlled Congress 
or other outside forces.

In the book, Kissinger candidly assesses world leaders - Nixon (flawed), Ford 
(authentic), Mao Tse-tung (determined), Leonid Brezhnev (envious), Yitzhak 
Rabin (wise), Augusto Pinochet (necessary), Mobutu Sese Seko (ostentatious).

And he gives an insider's view of detente with Russia, expanded relations 
with China, shuttle diplomacy in the Middle East, the division of Cyprus and 
civil war in Angola.

Many of these issues remain major challenges for President Clinton and his 
administration....

He still carefully observes U.S. foreign policy and sees some parallels 
between the Vietnam War and the Kosovo crisis.

``The similarity is in the sense that the Kennedy and Johnson administrations 
went into Vietnam thinking that they could win with technological 
superiority, not assessing the element of endurance, and this is clearly true 
in Kosovo and the Balkans,'' he said.

``If you use military force, and you are not willing to suffer casualties, 
then you get into the dilemma we are now in Kosovo. And when the only way to 
win is to make the population of the adversary suffer for it, that is a 
strange definition of morality and of humanity.''

Kissinger said U.S. presidents must always remain focused on what is in the 
national interest, something he contends Nixon understood well and Clinton 
does not.

``I do not accept this concept of humanitarian foreign policy. In specific, 
horrible cases like (the 1994 genocide in) Rwanda, I could say that the 
conscience of mankind is so offended that one really cannot be in a world 
where that happens,'' he said. ``In Kosovo, I believe we could have prevented 
the worst of ethnic cleansing by diplomacy, and I think we started down this 
path at least prematurely.''

Famous for improving relations with Russia, Kissinger said there is a danger 
in today's Russia of communists and nationalists joining forces to oppose the 
United States.

``I think the war in Kosovo contributes to this because it has created a 
public reaction (in Russia) that everyone agrees goes far beyond the Moscow 
elite,'' he said. ``So I think there is a danger of something similar to 
National Socialism in Germany, which is what the Nazis were.''

*******

#4
Y2K bug could produce a Russian Bill Gates, or...
By Elizabeth Piper

MOSCOW, July 11 (Reuters) - The millennium bug may give rise to a generation 
of Russian computer wizards who could follow in the footsteps of the world's 
richest man, Bill Gates -- at least, that's what the optimists think. 

But pessimists argue the computer glitch could lead to a meltdown at nuclear 
energy stations or maybe even give Moscow's military a signal to launch 
missiles against the United States. 

The only thing experts can agree on is that the problem, however threatening, 
has to be treated before the clocks hit midnight and the computers click from 
1999 to 2000. 

``There is not a full understanding of what might happen in 2000,'' said the 
lower house of parliament's representative for communications, Alexander 
Ivanov. 

``Essential measures need to be taken for those systems that work on 
real-time -- financial services, transport, statistics -- where a casual 
approach will just not do.'' 

He said a government commission was sitting every month to work on the 
problem, under the leadership of Ilya Klebanov, deputy prime minister for the 
military industrial complex. 

But while many Western observers continue to criticise Russia's belated 
efforts to make sure that computer systems do not go haywire by mistaking 
2000 for the year 1900, Ivanov believes the problem could have a happy 
ending. 

``(The millennium bug problem) has provoked such fuss that for the last half 
a year you would think we had magnates like Bill Gates working (here in 
Russia),'' Ivanov told Ekho Moskvy radio station. 

The Microsoft chairman is ranked the richest man in the year by Forbes 
magazine with $90 billion, a sum just short of Russia's Soviet-era debt, put 
at about $100 billion. 

RUSSIA SEES BUG AS ANOTHER EXPENSIVE PROBLEM 

Russia's lack of money to solve the problem is one of the West's main 
concerns. 

Many in the West fear that Russia, still mired in financial crisis, has 
failed to give enough attention to tackling the bug, which stems from the 
once common practice of using only two digits for the year in dates, like 97 
for 1997. 

That shortcut has the potential, when dates change in 2000, to confuse 
computers and microchips, causing them to produce flawed data or to crash. 

Lawrence Gershwin, national intelligence officer for science and technology, 
recently told a Senate special committee on the 2000 technology problem that 
Russia's economic problems combined with the Y2K glitch could cause major 
problems. 

``The coincidence of widespread Y2K-related failures in the winter of 
1999-2000 in Russia and Ukraine, with continuing economic problems, food 
shortages and already difficult conditions for the population could have 
major humanitarian consequences for these countries,'' he said in a statement 
published on the CIA's web site. 

Gershwin said Russia could face a loss of power next winter. 

``Russia has exhibited a low level of Y2K awareness...While the Russians 
possess a talented pool of programmers, they seem to lack the time, 
organisation and funding to adequately confront the Y2K problem.'' 

Russian government experts have said the country needs $2-3 billion to tackle 
the millennium bug. Military officials say they have under $4 million to 
spend on upgrading the nuclear arsenal's computer brains. 

By contrast, the U.S. state of Texas alone is spending $280 million to fight 
the bug. 

Klebanov agreed that funds were tight but said he was positive the problem 
would be fixed. 

``Work is proceeding fruitfully, but as always there is not enough 
financing,'' he said. ``Russia expects nothing terrible.'' 

SCARY SCENARIOS DON'T WORRY RUSSIAN OFFICIALS 

But the West is still worried that Russia's Soviet-designed nuclear plants 
and military systems will experience computer breakdowns in 2000. 

Gershwin said internal components or sensors crucial to the operations of 
nuclear plants could be affected or degraded by Y2K problems. 

He said the problems could lead to power losses and the shutdown of reactors. 
If a computer controlling power production fails, there would have to be 
diesel generators to supply power to cool pumps and remove heat from the core 
of the plant. 

``These diesel generators must have adequate fuel supplies on hand for at 
least a week in order to prevent fuel meltdown,'' he said. Russia would need 
money to prevent this from happening. 

Gershwin along with other Western experts is also worried about Russia's 
military complex. But he shrugged off frequent suggestions that the Y2K bug 
could trigger a missile-launch. 

Russian military officials also say there is nothing to worry about because 
automatic control systems governing Russia's nuclear missiles are immune to 
the problem. 

``I apologise in advance if I fail to justify the hopes that there may be 
among you for an apocalypse if we do not solve this problem,'' Major-General 
Vladimir Dvorkin said earlier this year at a news conference. 

``The calendar date does not exist (in control systems).'' 

******

#5
The Electronic Telegraph (UK)
8 July 1999
[for personal use only]
MiG pilot flies in face of Russian male prejudice
By Marcus Warren

RUSSIA'S only female fighter pilot says the sole concession her brother
officers make to her sex is that they try not to swear in her presence.

Capt Svetlana Protasova said: "I perform all the exercises - bombing, air
combat and interception - no worse than the men. Why shouldn't they
consider me their equal?" Piloting her MiG-29 is simple enough after
fighting to overcome Russian prejudice and fly with the men.

She succeeded only after securing an audience with the air force's
commander-in-chief. Now her battle has been won, Capt Protasova, 33, who is
single, suffers the same privations as any other officer in Russia's
cash-strapped armed forces.

She has only just received her salary for April, a mere £40. Home is
a provincial hotel room with a shower at the end of the corridor and
running water only first thing in the morning and late at night. Life in
the town of Borisoglebsk is no holiday and the rundown state of the armed
forces means that there is little relief from the tedium during working hours.

She said: "Recently we have not been doing too much flying. There is either
no fuel or no spare parts. And in the evenings there is nothing to do at
all." Last year, she went riding in her spare time. But this spring the
horses were sent to the abattoir because there was no food for them. Now
she walks her sheepdog, Mashka, to occupy herself.

However, the thrill of flying her MiG-29, powered by two engines each
providing 18,000lb of thrust, makes all the frustrations worthwhile. She
says: "You sit in the cockpit, taxi on to the runway, take off and
everything else ceases to exist. Thanks to minutes or even seconds like
that you stop worrying about the daily grind."

******

#6
Russian gov't broke, but economy mending
June 11, 1999
By Brian Killen

MOSCOW (Reuters) - Russia's financial collapse last year may have turned
out to be a blessing in disguise, at least for those involved in the real
economy. 

Analysts say many Russian companies, benefiting from the de facto
devaluation of the rouble last August, have never been so competitive.
Industrial output is recovering and the stock market has risen from the
ashes. 

``The situation in Russia has improved greatly,'' said Anders Aslund,
senior associate at the Carnegie Endowment for International Peace in
Washington. 

``The government ran out of money, which was the best thing that could have
happened to it. Therefore the government is being forced to cut the most
unnecessary expenditures and reduce the budget deficit,'' he added. 

Of course, vast fortunes were lost on markets when Asian contagion turned
into a particularly virulent Russian flu. Foreign investors fled the
carnage and are unlikely to return soon in big numbers. 

Many Russians saw their savings frozen in troubled banks or eroded by a
jump in inflation. Jobs were lost, and the state is now virtually bankrupt,
its credit reputation in tatters. 

The world's biggest country remains on the brink of a sovereign debt
default, and successive governments have done extremely little to repair
the damage. 

NOT ALL DOOM AND GLOOM 

Yet analysts say all is not doom and gloom. 

``The point is that the government has no money and the important thing for
the economy is that the old subsidization ends, and that has essentially
happened,'' Aslund said, add important thing for the economy is that the
old subsidization ends, and that has essentially happened,'' Aslund said,
add ing there is much less barter now. 

``Things have improved much more than you would expect from just looking at
government policies.'' 

Most believe the International Monetary Fund will approve a new loan for
Russia this month, allowing the government to service debts to the IMF and
receive additional billions from the World Bank. 

Russia's special envoy the the IMF said Saturday the IMF had endorsed a
memorandum setting out Moscow's policy. The signing of the memorandum by
Prime Minister Sergei Stepashin and central bank chairman Viktor
Geraschenko would mark the final step in Russia's application for a $4.5
billion loan over 18 months. 

This will save Russia the ignominy of becoming one of the few countries to
default on IMF debt, and will open the door to restructuring agreements
with other foreign creditors. 

``From a purely macro-economic fundamental standpoint, this year will be
relatively successful for Russia,'' said Natalya Orlova, economist at Alfa
Bank, referring in part to rising industrial production and slowing
inflation. 

``The economy is still benefiting from the effects of devaluation, in
particular there is a considerable improvement in import substitution,''
she added. 

REFORMS STILL SLOW 

But analysts see little happening in terms of structural reforms, calling
the snail's pace of banking system reform especially painful. 

The lack of political stability is also a strong deterrent to foreign
investors. A parliamentary election is due in December and a presidential
poll in mid-2000. 

``Even if political stability returns with the parliament and new
president, Russia still has to put in place very considerable changes and
improvements in corporate governance,'' Orlova said. ``It will take some
years.'' 

Foreign investors in Russia complain bitterly about cumbersome tax
regulations, corruption and crude violations of minority shareholders'
rights. Nevertheless, analysts see an equities market boom marking the
twilight of President Boris Yeltsin's era. 

``Because Russia fell so hard, it will no doubt be the best-performing
stock market in the world this year,'' Aslund said. Russian stock indices,
the worst emerging market performers last year, are now around the levels
of last July-August. 

Jonathan Garner, Flemings' director of emerging market strategy, agreed
that Russian stocks had star potential, especially since the market had
been ``ludicrously oversold.'' 

``We've been bulls on Russia for some time now and it's pretty well panning
out the way we thought it would,'' he said, adding that oil and gas firms
which profited from the rouble devaluation and higher oil prices this year
had fueled gains. 

But, while pointing to the potential of certain stocks, Garner was under no
illusions about Russia's problems, particularly nonpayment and
nontransparent regulatory process. 

``Don't get me wrong, we're still looking at a country that will take years
to regain access to international credit markets... where debt
restructuring has to be agreed and the economy is in very poor shape.'' 

*******

#7
From: R.Thomas@open.ac.uk (Ray Thomas)
Subject: WHO HAS THE VIRTUAL ECONOMY/re Moody/3388
Date: Mon, 12 Jul 1999

Thank you, Stephen S. Moody, for that crucial contribution.

This week the Bank of England has started selling off some of its gold
reserves in order to increase the proportion held in US$s and Euros. The
only people who have so far expressed alarm at this selling are those
connected with the gold mines in South Africa who fear falls in the price of
gold. 

[I thought that Russia was an even larger producer of gold. Is this still
so? Maybe the lack of protest from Russia is only because the price of gold
is a relatively minor economic problem?]

Nobody else is alarmed by the sale of gold because they have as much faith,
and perhaps more faith, in the value of the $, the Euro, and the Pound
Sterling that they do in the price of gold. But gold is of course the only
real and tangible form of money of the other three forms mentioned so far.
The values of the $, the Euro, and the Pound Sterling, depend upon faith -
or, to be more specific, they depend upon belief in the stability of the US,
European, or UK banking systems.

It is an amazing display of ignorance for US bankers and economists to talk
of Russia having a virtual economy because it depends upon barter. Perhaps
it is just loose talk. Virtual in everyday usage means not real. But
virtual also has an almost contradictory meaning of, to quote Webster,
'having the power of invisible efficacy'. Perhaps those who have
popularised the idea that Russia has a virtual economy had the second
meaning in mind????

But perhaps this use of the term virtual indicates an unwillingness of
bankers and economists to admit to themselves that the magnificent US
economy also depends upon faith. Perhaps these bankers and economists are
so used to valuing themselves in terms of $s that they don't like to think
of that valuation as dependent upon people having faith in the $??

That second meaning of virtual 'of having the power of invisible efficacy'
would certainly be consistent with the work of Keynes who pointed out more
than a half a century ago that any commodity which is relative durable can
take on the function of money. And that seems to what is happening on a
large scale in Russia. People and organisations believe in the value of
the products they make. It is this belief, plus the demonstrable exchange
value of the products, that supports the barter economy. 

The Russian economy would of course function much more efficiently if there
were a proper banking system. Some sympathy should be accorded to the
robber barons, and others, in Russia who have transferred their currency
abroad. Many of them must have felt there was little choice. Keeping
assets in 'hard' currency must have often seemed the only way of preserving
control of the assets, not to mention their value. The absence of this
money as well as the absence of a proper banking system within Russia has
just created a situation of demonetisation.

There is little doubt that the persistence of declarations that Russia has a
virtual and bankrupt economy helps to maintain this situation of
demonetisation and makes it more difficult to develop a banking system.

Those commentators who pontificate about the quantity of roubles being
printed and the relationship to inflation also fail to appreciate the
importance of faith - or, to put the matter more scientifically, to the
reasons and meanings that guide people's actions. The quantity of money is
usually a secondary factor. What is much more important in determining
inflation is expectations about the future.

The most simple explanation of Russia's recent success in checking inflation
is simply that Russians don't believe that inflation will happen. Maybe
they have come to believe that the inconvenience of holding $ behind their
steel reinforced doors has reached its limit. And that the Rouble is
ridiculously undervalued in 'real' terms relative to the $. 

The policies of Alan Greenspan demonstrate well that he knows the importance
of expectations in determining the value of the $ and $ related assets. Why
cannot those who have benefited from his stewardship recognise the
importance of such expectation in determining the value of the rouble and
rouble related assets?

*******

#8
From: IRASTRAUS@aol.com (Ira Straus)
Date: Sun, 11 Jul 1999
Subject: re Goodman #3381. Who lost Russia? Bush did.

Congratultions on Melvin Goodman's two pieces on how the Bush-Scowcroft 
Administration tried to turn back the clock in an anti-Russia anti-Gorbachev 
direction (after the Reagan Administration's sensible pro-Gorbachev 
approach). Finally someone has told the truth about the Bush Administration's 
policy! And in a way that looks to me authoritative.

The truth ought to have been enough on the basis of facts of the public 
debate in that period over policy toward Russia. Yet it has virtually been 
erased from the public memory. Bush & Co. have come to be praised as great 
leaders in this period. This has been true especially since it has become 
popular to launch into Clinton for his crime of being pro-Yeltsin; Bush's 
petty anti-Russian anti-Yeltsin attitudes can be made to appear as somehow 
statesmanlike, given the pervasiveness today of anti-Yeltsin sentiments. 

Memory has faded of the actual debates of that period, when Bush & Co. 
dedicated themselves to shooting down just about any and all ideas of helping 
Gorbachev or helping Russia. It was obvious to everyone at the time that the 
help that actually was promised in 1992 was too little too late; it was a 
belated and begrudging concession to the critics of the Administration. But 
this too has been forgotten. Memoirs about the period from Bush 
Administration figures have come to be written in a hush-hush partisan way. 
Baker and his people, who had triumphed rhetorically over Scowcroft during 
those years and had offered a hope, however slim, of a better approach, have 
since 1993 capitulated to Scowcroft, denying that they had had any 
significant differences with him, and have presented a united front in 
attacking Clinton for his reversal of the "great" Bush years. 

Since 1994 or so, the acclaim for the Russia policy of the Bush years has 
become virtually unanimous in foreign affairs commentary. Yet those were the 
precise years when Russia was "lost". 

All possibilities were open in Russia-West relations at the end of 1991. By 
the spring of 1992, the doors were already rapidly closing. James Billington 
has accurately described it as a case of "unrequited love". 

December 1991 was the time when the Russian government wanted to call itself 
an ally of America and the West. The time when it spoke publicly of joining 
NATO, and said that the reason and spirit of its wish to join was as a 
country that shared the ideals and goals of the alliance and wanted to 
partake its rightful share of the responsibility of promoting those goals. 
That was a language and a love that could not continue unrequited. Maybe it 
could continue unrequited for a while in a small country that was always used 
to tacking after big countries, say the Czech Rebublic, and where there was 
an elite consensus in favor of joining the West wholesale. But not in Russia. 

The refusal to requite Russian love was the essence of Scowcroft's doctrine, 
and of Kissinger's doctrines that stood behind him. The growing Soviet and 
Russian affection for the West was not welcomed but spurned under their 
approach. For them, it was a fixed foundation for reasoning that Russia must 
be the geopolitical adversary of the West, and the best that could be done is 
a detente in which the adversarial relation is softened but perpetuated; 
therefore any Russian statements of friendly sentiment must be a fraud, a 
plot to divide and deceive the West; therefore any Westerners who took those 
sentiments seriously were dangerous dupes, victims of "Gorbymania", against 
which it was necessary constantly to caution.

It was possible to believe, up to the dissolution of the Soviet Union at the 
end of 1991, that all this Bush Administration hostility was a way of saying 
that Russia had not changed fundamentally enough, inasmuch as it retained the 
core elements of the Communist system of power. Thus Russians were prone to 
keep going farther in their pro-Western attitudes, in the hope of getting 
their love requited. But after January 1992 there was nowhere farther to go. 
Russia sailed off on its honeymoon with the West, only to notice a few weeks 
later that the Bush Administration hadn't come along, it was still sitting on 
the shore, "waiting and seeing" ... and dropping hints every few days that it 
expected the whole Yeltsin ship to capsize in a matter of weeks and for 
Russia to revert to some more hostile leadership, or to chaos. That was when 
the love began to go sour.

In December 1991-January 1992, The Soviet Union was dissolved and shock 
therapy attempted. The Communist Party had already been banned after the 
August coup. None of this was done under Western dictation, and all of it was 
done primarily for domestic political reasons and out of native conviction; 
but the conviction was transparently coupled with a belief that this was what 
the West was waiting for and what was needed for winning Western affection. 
Shock therapy was not a result of any Western policy of aid help to Russia; 
rather, it was a result -- in the part of it that genuinely can be attributed 
to the West -- of a Western policy of refusing aid. When the non-aid policy 
was rationalized by the Bush Administration before December 1991 -- as it did 
repeatedly when it was answering its domestic critics who were calling for 
aid -- it was done with the easy argument that Russia hadn't met the 
conditions for making aid worthwhile, it would all go down the black hole of 
central planning and subsidies to waste, and might be used to build up a 
power that was still our enemy. These arguments encouraged Russians to think 
that the dissolution of the Soviet Union and the immediate "shock" 
introduction of a market was what would be needed for winning Western trust 
and affection and support. And it did win a lot of trust and affection from 
the Western public -- it was just the Bush Administration that remained 
begrudging, but that was where the support would have had to come from.

By the spring of 1992, Russian attitudes toward the West had already turned 
quite bitter, never to recover. While the downturn in sentiment was still in 
principle reversible, it has as yet never been reversed; and it has grown 
harder and harder to reverse it, since the bad feelings have kept getting 
reinforced. The Clinton Administration did not create this negative turn in 
sentiment; if anything it has slowed it down and staved off its definitive 
triumph, which might otherwise have come as early as mid-1993. But it also 
perpetuated many of the Bush mistakes, while adding some serious blunders of 
its own, and has never had a policy concept adequate for reversing the 
downturn in sentiment in Russia.

The feeling among Russians that American advice has wrecked their country and 
was meant to do so -- this was already widespread by mid-'92, and has only 
grown more solid since then, as seen in the poll statistics to which Jerry 
Hough often points. The feeling that the West had simply taken Russia's 
concessions and then used them at Russia's expense was already prevalent by 
mid-'92. 

My memory tells me that Charles Krauthammer wrote a column at the time saying 
that, if there is ever a debate on 'who lost Russia', the answer will be 
obvious: the Bush Administration. I didn't clip the column, since the point 
was broadly held at the time. Since then, strangely, the obvious has been 
forgotten, and a mythological version of the history of those years has been 
constructed in its place.

In real time, everyone was criticizing the Bush Administration for its 
refusal to help Russia and its refusal even to be friendly to it. Kissinger 
was virtually the only public commentator who defended the Bush policy; his 
sole criticism was that Bush was pretending to help, while Kissinger said we 
should declare flat out that we aren't helping in any serious way and we 
never will help. Later he replicated this position on the strategic level, 
saying that NATO should slam its door in Russia's face and say outright that 
Russia will never be let in. 

Later, and in no small part as a consequences of these attitudes, Russia-West 
relations have grown so bad that the Kissinger-Scowcroft school (which 
includes Eagleburger, Rice, Gates, and others) has finally regained some 
relevance. Detente is in some respects needed again, unlike 1989-92 when the 
need was to transcend detente. The recent prescriptions from this school on 
realistic diplomacy and self-restraint, e.g. restraint regarding further NATO 
expansion and regarding Kosovo, are also relevant at this time. But while we 
may respect this school on some of its ephemeral tactical advice, we should 
always remember that strategically it is dead wrong. It was this group that 
led the U.S. virtually to support Milosevic (a friend of Eagleburger's) in 
1989-91, at a time when Russia was against him and we could have worked 
together with Russia to stop him. The post-Yugoslav wars could have been 
headed off painlessly at that time, without cost in relations with Russia; 
now it is our misfortune that we have to respect the advice of this school on 
how to avoid making the cost even worse.

The importance of the misperception of the Bush period has grown with time, 
rather than fading away. Year after year, more and more false deductions have 
been piled up upon the myth about the brilliant Bush policy, compounding the 
original error. The structure of myth is by now massive. And it is going to 
become even more important in the coming sixteen months. It will be trotted 
out routinely in the upcoming election campaign, as a way of attacking Gore 
and anyone else who might seem friendly to Russia. (Condoleeza Rice's 
comments on JRL 3381 were just an opening salvo for this purpose.) It will be 
used as a basis for demanding a policy on Russia that is once again, as in 
1989-92, "professional and realistic and focused on our national interests". 
These, alas, are code words; in practice, they translate as "cold and petty, 
and oblivious to the fundamental national interest in having a friendly 
Russia". It would be a disaster for America if this attitude were to come 
once again to come to prevail here. 

It would be worth considerable effort to get a more accurate public and elite 
recollection of the actual course of US policy toward Russia from 1989-92. 
Mr. Goodman's contributions provide a start on that. I hope he will make more 
contributions on this matter and that he will get wide public visibility for 
his truth-telling.

Sincerely,

Ira Straus
U.S. Coordinator, 
Committee on Eastern Europe and Russia in NATO, www.fas.org/man/nato/ceern. 
The opinions expressed above are the responsibility solely of the author, not 
the Committee.

*******

#9
Date: Sat, 10 Jul 1999 
From: Val Samonis <vsamonis@chass.utoronto.ca>
Subject: Val Samonis on "Kolodko/Russian Malaise and Polish Success"/3384

I inserted my (VS) comments in Prof. Kolodko's text. Regards. Val Samonis,
The Center for European Integration Studies, Bonn.

> ..., in the case of Poland there where different periods during the last
> ten years of transition. After initial "shock without therapy" in
1989-1992 --
> with deep recession, spreading poverty and growing inequality, 

VS: Conveniently, Mr. Kolodko utilized here a rehashed version of worn-out
tirades against "capitalism" customary at the times when he was a young
committed communist at what now is the Warsaw School of Economics. In
fact, most of the poverty was inherited from communism (over a
generation-long lag in development) and simply came into the open at the
start of Prof. Balcerowicz reforms. Growing inequality is part and parcel
of any reforming steps dismantling communist "uravnilovka" when everybody
was equal but communists like Mr. Kolodko were "more equal" of course. The
genuine equality (e.g. measurable by the Gini coefficient) you can build
only slowly (if at all) with the growth of the middle class.

> meager progress
> with macroeconomic stabilization and delay of institution-building --

VS: In fact, the daring Balcerowicz Plan created most of the foundations
on which Polish success is built. For example, a splendid stabilization
achievement was the introduction of a measure of currency convertibility
(on current account, internal). The tone of the early reformist thoughts
(e.g. Prof. Zielinski in "Soviet Studies", Glasgow U.) was that you can do
such a thing only as a crowning achievement of the long reform process; 
Prof. Balcerowicz managed to turn this theory on the head, with all the
stabilization and other benefits stemming from opening the economy. 
Likewise, Balcerowicz reforms not only dealt a mortal blow to the
suffocating central planning but also ignited the spectacular growth of
the new private sector on which Polish success largely rides thus far. And
as Prof. Kolodko very well knows, institutions cannot be fully built in
such a Schumpeterian creative destruction blitzkrieg (interrupted, by the
way!); they take a very long time to develop. 

> there
> was
> the period of therapy without shocks. During the implementation of
development
> program combined with gradual yet determined structural reforms,
"Strategy for
> Poland' -- i.e. since 1994 until 1997 -- the GDP expanded by 28 percent,
> inflation was brought down to 13 percent, unemployment fell by one third,
and
> there was significant progress with new institutional arrangements and
> integration of Poland into the world economy (accession to the OECD in July
> 1996).

VS: I am not against Mr. Kolodko blowing his own horn but this is largely
undeserved credit grabbing. Anyone with even a cursory knowledge of the
postcommunist transitions knows about the transformation recession (longer
and more painful in "gradually" reforming countries like Ukraine) and the
J-curve shape of the GDP and employment dynamics. Thus, in large part, Mr. 
Kolodko reaped the fruits of the earlier Balcerowicz reforms and should be
credited for continuing many of them in his own less-than-transparent
ways, though deceleration of the privatization momentum and Poland's still
high (relatively) inflation should in part be blamed on Mr. Kolodko's
Government. 

> Then, in 1998-99, the economy has lost momentum again; the GDP grew in
> 1998 by only 4,8 percent (after average rate of growth during preceding 4
> years
> of 6,4 percent) and in the first quarter of 1999 by barely 1,5 percent,
> inequality is rising again as does unemployment, and the social tensions are
> mounting one more time.

VS: The reason is intensification (perhaps overdone) of reforms ("four
reforms") after a period of stagnation on some fronts during Mr. Kolodko's
time in government. These reforms are badly needed to keep Poland
developing at respectable rates ("bicycle theory"). Social tensions are to
be interpreted as evidence that Poland largely skimmed somewhat "easier" 
growth effects of mushrooming (thanks to the early and daring Balcerowicz
Plan) new small private firms (some of which lived off the unreformed
public sector to a large measure) and in many cases postponed painful
problems associated with transforming the hard core of the communist
economy and the public sector, e.g. by privatizing slowly compared to the
Czech Republic or the Baltics. In the absence of deeper and wider
Schumpeterian creative destruction effects usually brought about by speedy
privatization, these problems are now coming into the open (e.g. in
mining, health care, etc) and for a longer time (e.g. compared to the
Czech Republic or the Baltics) will serve as a drag on the rate of growth
and the health of public finance causing some measure (probably tolerable)
of political instability. 


> All these three consecutive episodes are the results of
> three different, not identical policies. Both -- the credit for the
success of
> the policies carried in 1994-97 as well as the blame for the failures of the
> policies in 1989-92 and 1998-99 -- are due to the Polish policymakers,
and not
> to the IMF or any other foreign partner, with all the respect due to them.
> Third, the problem is that being involved in policymaking -- as I've been
> all the time in different capacities, but most actively in 1994-97 as Deputy
> Premier and Finance Minister of three subsequent Polsih governments -- one
> must listen to the IMF suggestions, but not necessary to follow always
> all of them.

VS: Here at least Mr. Kolodko deserves full credit for consistency in
chipping away at some of the safer margins of ruling orthodoxies. As a
young and promising communist, he did well as a carefully "licensed" 
critic of the orthodox communist economy (e.g. its boom-bust investments
cycles irreverently deviating from the sacred "no crisis" tenet), roughly
at the times when I was being dragged before the Polish communist security
police (SB), expelled from school, and otherwise persecuted for the
"crimes" of "unlicensed" criticism of communism in its entirety. 


> The IMF has helped a lot, but (as I said at the Jamestown Foundation's
> conference) sometimes it was (or still is) wrong. Thus while dealing with
the
> IMF one must be able to comply when the Fund is right and to disagree when
> it is
> wrong. I'm afraid that during the early stage of Polish transition the
> advice of
> the Fund was listen too often, even then when it was incorrect. I did listen
> when the IMF was right, but I didn't when it was wrong. In Russia, too
> often the
> governments tried to listen when the Fund was not necessary right (for
> instance,
> insistence for premature liberalization of the GKO market and the free
access
> for foreign investors , or insistence on cutting the budget expenditure
at the
> cost of the arrears growing beyond sustainability, what had destabilized the
> fiscal position of the government even more), and they didn't follow the
Fund
> arguments, when they were abolutely correct (for instance, widening the tax
> basis).

VS: Much easier said than done, especially in Russia!


> Therefore, the Russian debate must continue, but the lessons that should
> indeed be learned by now both in Moscow and in Washington are at least the
> two:
> - first, neither for the Russian malaise, nor for the Polish success the
blame
> or the credit goes to the USA or the IMF; that is mainly the domestic
matter;
> - second, the outside world can help as much as it can harm. It depends
> both of
> the wisdom of international players and countries' policymakers, and their
> ability to meet the challenges. In the case of Russia -- unlike in that of
> Poland -- it has happened that too many mistakes for too long have been
> committed on the both sides.

VS: Agreed; but let's not forget that the Soviet/Russian case was and is
so much more difficult than the Polish case for many reasons Mr. Kolodko
knows very well. 

Respectfully,

Val Samonis, PhD, CPC
Senior Fellow and Advisor
The Center for European Integration Studies, Bonn

*******

#10
Boston Globe
11 July 1999
[for personal use only]
Yeltsin power grab seen in Belarus 
Effort to merge ex-Soviet republics seen as way president could extend term
By David Filipov

MOSCOW - A new country could appear in Europe by this fall, its apparent
purpose to perpetuate a 1,000-year-old truth.

A treaty merging the former Soviet republics of Russia and Belarus into a
single state may be signed this autumn, Prime Minister Sergei Stepashin of
Russia said last week.

Russia has been toying with the idea of a union with Belarus since 1996,
but progress has been slow. The announcement that the deal could be done
before next year's presidential elections stoked widespread speculation
here that President Boris N. Yeltsin of Russia plans to use the
confederation to extend his rule.

Many here believe Yeltsin has no intention of yielding power. 

A constitutional two-term limit requires Yeltsin to leave office this time
next year. But he could become the leader of the new Russia-Belarus union,
a new country with a new legal structure, and transfer many of his powers
to the new post. 

Such tactics are not without precedent in contemporary Europe. Slobodan
Milosevic retained his powers when he became president of Yugoslavia after
his legal term as the leader of Serbia ran out in 1997. Russian analysts
suggest the ''Milosevic variant'' is actively being discussed by Yeltsin's
backers.

Yeltsin, who started his summer vacation at his residence outside Moscow
yesterday, said in an interview published here last week that he would step
down when his term ends. Russia's minister for relations with other former
Soviet republics, Leonid Drachevsky, also ruled out a new role for Yeltsin,
saying Friday that he ''cannot be and will not be president of the Russia
and Belarus Union.''

But politicians, analysts and commentators here say the Kremlin's sudden
haste over the Belarus union means Yeltsin is at least considering the idea.

''In the worst-case scenario, Yeltsin is already actively scheming to
become dictator-for-life,'' the English-language daily The Moscow Times
said in an editorial last week. ''Even in the very best-case scenario,
Yeltsin has not made up his mind yet, but is still actively constructing
extraconstitutional roads to stay in power, just in case.''

Moscow's rumor mill has been rampant with speculation that Yeltsin's
Kremlin entourage, popularly known here as ''The Family,'' was plotting
ways to prolong the president's term. 

Aside from the Belarus idea, one scenario involves provoking the Communist
Party into doing something that would allow Yeltsin to ban it. Removing the
body of Vladimir Lenin from the Kremlin wall and giving it a Christian
burial is one such possibility. Yeltsin has fed that rumor by publicly
calling for Lenin's burial.

Another commonly discussed scheme involves fomenting strife in the Caucasus
and declaring a state of emergency. Yeltsin has fed that one too, by
ordering preventive airstrikes against ''bandit groups'' in the breakaway
region of Chechnya.

But some think the Belarus plan is the most likely scenario, since it would
be easiest to pull off.

Former Soviet President Mikhail Gorbachev, commenting last week on this
possibility, suggested Yeltsin might try to justify staying in power by
saying he is acting in the public interest. 

While Yeltsin is universally unpopular in Russia, a union of the two
countries would be embraced both here and in Belarus, where nostalgia for
the old Soviet Union is strong. Recent polls show 80 percent of Russians
support the merger. The parliaments of the two nations, dominated by
Communists and other parties similarly nostalgic for days gone by, have
already agreed to a new national anthem that uses the music of the old
Soviet one.

That means Yeltsin's sworn enemies, the Russian Communists, cannot speak
out against his plans, which, for the moment anyway, so closely parallel
their own. That in itself no doubt gives the Kremlin leader no small delight.

But there are problems. Some Yeltsin aides fear unification could provide
an opportunity for Belarus's authoritarian president, Alexander Lukashenko,
to fulfill his own ambition of moving into the Kremlin.

A charismatic speaker who has banned opposition parties and jailed their
leaders, Lukashenko has grown popular in Belarus's poorest rural areas
since his election in 1994. Lately, he has been touring Russia in what
appears to be an effort to build a political base. Last week he said he
favored putting to a vote whether he or Yeltsin should lead the new union.

Russian liberals are wary of the union, partly because they worry about
Lukashenko's poor record on human rights, partly because they wonder how
Russia would absorb the Soviet-style command economy Lukashenko has
reinstated in his impoverished country of 10 million.

''A single economic course for a new state would be possible only under one
of two conditions: Either Russia swears off reforms, or Belarus takes them
up,'' commented Semyon Novoprudsky, an political analyst for the daily
Izvestia.

The Clinton administration has also voiced concern that a union could
undermine Russian democracy. 

''Absent the full restoration of democratic government in Belarus, it's
hard to imagine that any popular approval process on union in Belarus would
be truly democratic and representative of the will of the people,'' State
Department spokesman James Foley said Thursday.

Washington has long complained about Lukashenko, but its criticism was not
likely to be heard by policy makers in Moscow and Minsk, many of whom see
the union as an appropriate response to NATO's expansion into countries
like Poland and Hungary.

A more serious consideration for Yeltsin could be the reaction of the
autonomy-minded leaders of Russia's 89 regions. The leaders of Tatarstan
and Bashkortostan, predominantly Muslim semiautonomous republics smack in
the middle of Russia, both demanded to be a part of any negotiations
involving a new state.

*******